Senex gears up for first shale gas well

Senex Energy
, the oil and gas explorer formerly known as Victoria Petroleum, expects to drill its first shale gas well in Australia by early May in acreage it is acquiring through its $77.8 million takeover of Stuart Petroleum.

The Vintage Crop-1 well has the advantage of multiple targets, including a 0.5 million barrel conventional oil prospect in addition to the deeper shale gas formations, Senex managing director Ian Davies told Resources Daily.

“It was an oil prospect we were going to drill anyway," he said.

Senex is one of a handful of companies, led by
Beach Energy
, that is targeting a potentially huge shale gas resource in the South Australian Cooper Basin.

If it can be developed economically, this resource could substantially boost gas supplies for eastern Australia as well as provide supplies for liquefied natural gas export plants. A boom in shale gas in North America has transformed the US gas market, displacing LNG imports and turning the country into a prospective gas exporter.

Senex is mopping up minority holdings after acquiring more than 90 per cent of the shares in Stuart through its agreed scrip-based offer, announced in February. A key attraction of Stuart was its prospective shale gas acreage, in addition to the immediate boost it provided to Senex’s production and reserves, Mr Davies said.

The combined business is the third largest oil production company in the Eromanga and Cooper basins behind Beach Energy and Santos, and the largest acreage holder with more than 19,000 square kilometres of exploration permits.

Mr Davies said he was expecting the Vintage Crop-1 well to reveal a thick accumulation of shale, hopefully containing liquids-rich gas. The well is targeting shale rock at a depth of about 2200 metres, shallower than the 3500 metres depth targeted by Beach’s first two shale gas wells, Holdfast-1 and Encounter-1.

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But it will be about a year before Senex proceeds with hydraulic fracturing and flow testing at Vintage Crop-1. It will take six to nine months for the core samples from the well to be sampled in the US before the company decides to move to that stage of the process. The well is expected to cost about $4 million, compared with about $3 million for a conventional well.

Mr Davies is optimistic about the potential for shale gas in Australia but acknowledges there is “a long way to go".

“It’s going to take five to 10 years for it to become a fully-fledged producing industry," he said.